House prices fall again

HOUSE prices fell again last month, two influential surveys confirmed today, but there are signs that the rate of decline is slowing because a growing number of people think interest rates could fall again.

The Royal Institution of Chartered Surveyors says the number of its members reporting a fall in prices during December outnumbered those reporting a rise by 37%, meaning property prices have been falling steeply for five months. And the National Association of Estate Agents admitted that more than 20% of its members think their business turnover will fall this year.

Although signs point to further falls in house prices, including the fact that mortgage approvals fell to their lowest level in nearly a decade in November, the Rics said it expects a modest 3% rise this year. And the estate agents said that average property prices still finished 2004 on average 6.4% higher than the previous year.

The NAEA and Rics said that interest rates could well have finished their recent upward rise and the next monthly meeting of the Bank of England's monetary policy committee could even result in a cut in rates.

Richard Hair, the NAEA's president, said: 'There is a greater feeling of optimism among estate agents today than we had in January last year. This is based on the probability rather than the possibility that the market is set to turn. There are more first time buyers around but it is not exclusively at the bottom end of the market.'

He acknowledged that some estate agents continue to experience difficulties and that across the country some firms will start closing offices.

'In the very short term, we've seen the Countrywide profit warning, which is based on a lower level of turnover and that has got to have an effect. Some of our members' firms will be overstretched and will have based their business plans on overoptimistic projections. But most are well versed in the ups and downs of the property market and won't have serious problems,' he declared.

Homebuyers looking for a bargain can still find them. Hair said that there is now an average 5% difference between asking prices and the actual price achieved. Six months ago this figure was about 3%-4% but continues to widen, he admitted.

According to Rics, buyers are encouraged by the prospect that interest rates may now have peaked. Spokesman Ian Perry added:

'This seems to have given encouragement to buyers during a period which is traditionally quite weak. With the economy sustaining moderate growth, the conditions for a mild pick-up in the housing market are in place for 2005, though any further significant rise in interest rates will knock back confidence,' he said.